Online Advertising Forecast for 2010

Piper Jaffray estimates that the total online advertising market will reach $55 billion in 2010. That’s a 27% CAGR from 2005 levels.

SG Cowen says companies will spend $17.3 billion in paid search and $12.4 billion in other forms of online advertising.

So this is a huge growth industry.

A professor of entrepreneurship once told me that while most start-up companies go out of business in the first five years, he claimed that 80% of businesses started in an industry whose growth rate exceeded 10% annually would be in business after five years.

If that is true, it is more important to start a company in a growth industry than almost anything else. If you are in a growth industry, the rising tide tends to lift all boats, including yours.

If search engine spending keeps rising at 27% per year, a lot of companies will make a lot of money in this industry. Agencies who manage PPC campaigns, SEO firms, analytics companies, web site publishers with high traffic — all can do very well in the coming years.

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One Comment

  1. wilson ng

    I think we have to look at it from both sides.

    From what I know, investing in a business with hypergrowth is a very difficult proposition. Witness that most people who went into the dot com craze did not make it. Most investors in the 90s in China when it was enjoying almost 10% growth lost money.

    I originally thought it was great to invest in an industry where demand was growing 10 to 30% . Except that everybody thinks the same, and the supplly grows 50 to 100%, then somebody will lost his shirt if they are not careful!

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